UK farmland values are on course for a tenth consecutive year of annual growth

Across Great Britain the average value of prime arable land rose 2.1%.

(Source: Savills, 31 Jul 2012)

UK farmland values are on course for a tenth consecutive year of annual growth following a 3.9% increase for all land types during the first half of 2012. According to research the growth is predicted to continue with a five-year forecast from 2012 of 36%.

On the supply side, the first six months of 2012 recorded reduced activity in most places although there were increases in the availability of farmland in Scotland and two of the English regions. The amount of land openly marketed in the year to June 2012 was half the amount available in the same period of 2000.

UK farmland is recognised as a safe haven for investment and the number of investors looking to purchase farmland shows no signs of diminishing.

Land Supply 2012

Analysis reveals the volume of publicly marketed farmland fell by -9% across Great Britain and amounted to 86,850 acres compared with 95,200 acres in the first half of 2011. However, with the exception of the first six months of 2011, the volume of farmland marketed in the first half of 2012 is still 3% higher than levels recorded in the same period of 2009 and 2010.

In addition, the majority (80%) of this land was marketed in the second quarter of 2012, which according to research, with the exception of 2011 is the largest volume to be marketed in a second quarter since 2007. Also there have been a number of private transactions of substantial acreages during the first half of this year.

The graph below illustrates that across the individual regions, supply tightened in more locations than it increased. Increases in the volume of publicly marketed farmland were concentrated in the North of England (25%), the East of England (12%) and Scotland (11%) when compared to the first half of 2011.

In contrast, supply fell furthest in the East Midlands where a reduction of -50% was recorded. The amount of farmland marketed also fell significantly in the West Midlands (-29%) and the South East of England (-26%).

Land Values

According to the Farmland Value Survey, the value of land continued to strengthen in the second quarter of 2012. In England, the average value of prime arable farmland rose by 2.1%, recording total growth for the first half of this year of 4%. This compares with a 6.4% rise in the first half of 2011.

Closer analysis shows the highest rates of growth during the first half of 2012 were recorded across the arable areas of the eastern counties of England. Here, demand for productive commercial land remains strong. Prime arable land values increased by 4.6% in the East Midlands and 2.9% in the East.

Land Buyers and Sellers

The demand for UK farmland has not faltered. According to the analysis of farm transactions, where Savills acted for the buyer or seller, farmers continue to be the highest proportion of traders representing over 50% of buyers and sellers in the first half of 2012 with expansion cited as the main driver for those buying.

Buying for investment is up at 27% of all buyers compared to 17% at the same time last year. There has been no significant change in the means of purchase with only a quarter of all buyers primarily funding a purchase with borrowings.

Farmland Outlook – The Farmland Market in 2012

Savills remain confident that the baseline forecasts for average farmland values are still on track at around 5% growth for 2012; and 36% over the next five years staying ahead of inflation.

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